Hawaii: Department of Taxation Issues Guidance on Software

The Hawaii Department of Taxation recently issued guidance on the taxability of software. In Tax Information Release 2021-06, the Department confirmed its position that the sale of canned or prewritten software or a license to use canned or prewritten computer software is treated as the sale of TPP, regardless of the delivery method. A taxpayer producing custom software for a licensed seller is providing services to the licensed seller, regardless of whether the custom software is transferred to the licensed seller through a sale or as a license to use the custom software. In many states, the distinction between custom and prewritten computer software is relevant to its taxability. However, in Hawaii both sales of TPP and services at retail are subject to the 4.0 percent General Excise Tax (GET) rate. Wholesalers of TPP and services are subject to the 0.5 percent wholesaler’s GET rate. Please contact Reid Okimoto with questions on Tax Information Release 2021-06.